The Australian economy has avoided a recession

The Australian economy has avoided a recession, bouncing back to positive territory in the final three months of 2016 - and bringing the country's debt levels to their lowest in more than 30 years.

The economy expanded by 1.1 per cent in the December quarter, faster than expected by economists, after a shock 0.5 per cent decline in the previous three months.

The annual rate lifted to 2.4 per cent from 1.8 per cent, according to the Australian Bureau of Statistics.

The main contributions to growth came from household consumption and government spending, the data released on Wednesday showed.

Treasury secretary John Fraser (pictured) told a senate committee the fundamentals of the economy are 'sound but finely balanced'

Ahead of the report, Treasury secretary John Fraser told a senate committee the fundamentals of the economy are 'sound but finely balanced'. But as last year's contraction showed, it remained sensitive to shocks.

Mr Fraser also said the economy had been generating enough jobs to maintain a stable unemployment rate.

'But there is still spare capacity in the labour market,' he said.

The economy was still working through a complex transition away from mining investment and towards broader growth in an uncertain international economic climate.

'In this environment, we should ensure we are in the best possible position to benefit from an upswing (in the global economy), in particular by maintaining our openness to trade and investment,' he said in Canberra.

Treasurer Scott Morrison said Australia's debt levels are now the lowest they've been in more than 30 years.

Treasurer Scott Morrison (above) said Australia's debt levels are now the lowest they've been in more than 30 years

''There was a substantial narrowing in the current account deficit which would have seen from figures earlier in the week,' he told 9 Finance.

'That is down to $3.9 billion in the December quarter or 0.9 percent of GDP. '

That is the narrowest current account deficit as a share of GDP that we have seen since 1980.

Mr Morrison said the Australian economy was growing faster than every G7 nation and above the OECD average.

The latest growth figure confirmed the successful change that was taking place in the economy as it moved from the largest resources investment boom in our history to broader-based growth.

'While this growth result is welcome, we must continue to remember that our growth cannot be taken for granted and is not being experienced by all Australians in all parts of the

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